flood insurance

It’s not surprising that homeowners in flood-prone areas are asking their representatives in Congress to protect them from higher flood insurance bills.

Here’s the question. Who is going to protect them from higher floods?

Congress in 2012 did the right thing in fixing a broken flood insurance system that has fallen $24 billion in debt, largely because the price of flood insurance hasn’t for many years matched the risk of a flood. Now, both the House and Senate have passed bills that would undo many of these reforms.

Congress should find a way to address both the immediate and long-term concerns of their constituents, and the rest of the nation. We can’t ignore the plight of families facing hefty insurance increases, and we must ensure that the process of making flood insurance reflect flood risk is fair and transparent. But we also can’t ignore the increasing costs and risks associated with growing coastal development in an era of rising seas and heavier precipitation.

Among the problems with the National Flood Insurance Program (NFIP) that we outlined in a C2ES brief:

The National Flood Insurance Program (NFIP), a program which provides federally-backed flood insurance for homes along America’s rivers and coasts, was created by the enactment of the National Flood Insurance Act of 1968 (P.L. 90-448). The 44-year-old NFIP covers 5.6 million American households and more than $1 trillion in assets in flood-prone areas. As development continues in flood-prone areas and as those zones become larger and riskier due to sea-level rise and more extreme precipitation – two projected consequences of climate change, the gap between revenue and risk is likely to grow.

Over the years, Congress has approved a series of short-term reauthorizations of NFIA without addressing this underlying problem.[1] With the most recent reauthorization of the program, however, there appears to be some prospect of serious reform.

In July 2011, the House passed the Flood Insurance Reform Act, (H.R.1309) sponsored by Rep. Judy Biggert (R-IL). This Act would allow premiums to rise up to 20 percent a year, limit subsidized premiums to primary residences, and establish a technical advisory council to help update flood maps. The bill stops short, however, of requiring that updated maps take into account the full projected effects of climate change.

The Senate took up its own version (S.1940) in December 2011, sponsored by Sen. Tim Johnson (D-SD). While the bill would limit premium increases to 15 percent a year, it also would require that NFIP flood maps reflect the “the potential for future inundation from sea level rise, increased precipitation, and increased intensity of hurricanes due to global warming.”

The final action occurred in May 2012, when Congress passed the National Flood Insurance Program Extension Act (H.R.5740), and it was signed into law (Public Law 112-123). The legislation reauthorizes the NFIP for five years, ending a series of short-term extensions that had kept the program on life support for the past several years. The bill represents a major step towards actuarial pricing and full accounting of climate risk, ensuring that climate impact projections are factored into future calculations of flood risk. The bill authorizes a new effort to bring the maps up to date. And although the word “climate” does not appear in the text, the bill directs FEMA to use “the best available science regarding future changes in sea levels, precipitation, and intensity of hurricanes” – likely projected impacts of climate change – as it updates the maps and sets its insurance premiums.

[1]The National Flood Insurance Act was amended in 1969 to provide coverage for mudslides. It was again amended in 1973 by the Flood Disaster Protection Act. This Act made the purchase of flood insurance mandatory for the protection of property within special flood hazard areas. In 1982, the Act was further amended by the Coastal Barrier Resources Act (CBRA). The CBRA enacted a set of maps depicting the John H. Chafee Coastal Barrier Resources System (CBRS) in which federal flood insurance is unavailable for new or significantly improved structures. Then in 1994, the National Flood Insurance Reform Act codified the Community Rating System (an incentive program that encourages communities to exceed the minimal federal requirements for development within floodplains) within the NFIP. The Act was further amended in 2004 by the Flood Insurance reform Act, with the goal of reducing losses to properties whose owners had suffered from repetitive losses.